##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 1-7872
 
 BREEZE-EASTERN CORPORATION
  Delaware
    
    95-4062211(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. employer
identification no.)35 Melanie LaneWhippany, New Jersey
(Address of principal executive offices)
    
    07981
(Zip Code)
   þ o
  o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



INDEX
 Page No.PART 1 Financial InformationItem 1. Condensed Consolidated Financial Statements (Unaudited)
    
    
    3Condensed Consolidated Balance Sheets
June 30, 2010 (Unaudited) and March 31, 2010
    
    
    4Condensed Consolidated Statements of Consolidated Operations Three Month Period Ended
June 30, 2010 and June 28, 2009 (Unaudited)
    
    
    5Condensed Consolidated Statements of Consolidated Cash Flows Three Month Period Ended
June 30, 2010 and June 28, 2009 (Unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    7-16Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    17-23Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    25PART II. Other InformationItem 1. Legal Proceedings
    
    
    25Item 1A. Risk Factors
    
    
    25Item 6. Exhibits
    
    
    25SIGNATURES
    
    
    26EX-31.1EX-31.2EX-32.1
  2




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PART I. FINANCIAL INFORMATION
 
 Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  st
  3




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REEZE-EASTERN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
    
    
    (Audited)June 30, 2010
    
    
    March 31, 2010ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    2,361
    
    
    $
    3,371Accounts receivable (net of allowance for doubtful accounts
of $154 at June 30, 2010 and $150 at March 31, 2010)
    
    
    14,880
    
    
    
    12,102Tax refund receivable
    
    
    904
    
    
    
    904Inventories
    
    
    16,900
    
    
    
    17,365Prepaid expenses and other current assets
    
    
    537
    
    
    
    423Deferred income taxes
    
    
    5,609
    
    
    
    5,686Total current assets
    
    
    41,191
    
    
    
    39,851PROPERTY:Property and equipment
    
    
    17,216
    
    
    
    20,323Less accumulated depreciation and amortization
    
    
    7,939
    
    
    
    10,748Property  net
    
    
    9,277
    
    
    
    9,575OTHER ASSETS:Deferred income taxes
    
    
    13,430
    
    
    
    13,718Goodwill
    
    
    402
    
    
    
    402Real estate held for sale
    
    
    3,800
    
    
    
    3,800Other
    
    
    8,426
    
    
    
    8,762Total other assets
    
    
    26,058
    
    
    
    26,682TOTAL ASSETS
    
    $
    76,526
    
    
    $
    76,108LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITES:Revolving credit facility
    
    $
    
    
    
    $
    Current portion of long-term debt
    
    
    3,286
    
    
    
    3,286Accounts payable  trade
    
    
    6,160
    
    
    
    5,578Accrued compensation
    
    
    2,267
    
    
    
    2,286Accrued income taxes
    
    
    155
    
    
    
    114Other current liabilities
    
    
    3,552
    
    
    
    3,399Total current liabilities
    
    
    15,420
    
    
    
    14,663LONG-TERM DEBT, NET OF CURRENT PORTION
    
    
    13,964
    
    
    
    14,786OTHER LONG-TERM LIABILITIES
    
    
    18,583
    
    
    
    18,839COMMITMENTS AND CONTINGENCIES (Note 13)
    
    
    
    
    
    
    TOTAL LIABILITIES
    
    
    47,967
    
    
    
    48,288STOCKHOLDERS EQUITYPreferred stock  authorized, 300,000 shares; none issued
    
    
    
    
    
    
    Common stock  authorized, 14,700,000 shares of $.01 par
value; issued, 9,813,097 at June 30, 2010 and
March 31, 2009, respectively
    
    
    98
    
    
    
    98Additional paid-in capital
    
    
    94,734
    
    
    
    94,612Accumulated deficit
    
    
    (59,274
    )
    
    
    (59,863
    )Accumulated other comprehensive loss
    
    
    (254
    )
    
    
    (285
    )35,304
    
    
    
    34,562Less treasury stock, at cost  416,386 at June 30, 2010
and 416,147
at March 31, 2010
    
    
    (6,745
    )
    
    
    (6,742
    )Total stockholders equity
    
    
    28,559
    
    
    
    27,820TOTAL LIABILITIES & STOCKHOLDERS EQUITY
    
    $
    76,526
    
    
    $
    76,108
  4




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BREEZE-EASTERN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three Months EndedJune 30, 2010
    
    
    June 28, 2009| |Net sales
    
    $
    16,540
    
    
    $
    13,362Cost of sales
    
    
    10,407
    
    
    
    8,128Gross profit
    
    
    6,133
    
    
    
    5,234Selling, general, and administrative expenses
    
    
    4,629
    
    
    
    4,184Relocation expense
    
    
    211
    
    
    
    138Operating income
    
    
    1,293
    
    
    
    912Interest expense
    
    
    214
    
    
    
    234Other expense  net
    
    
    64
    
    
    
    61Income before incomes taxes
    
    
    1,015
    
    
    
    617Income tax provision
    
    
    426
    
    
    
    259Net income
    
    $
    589
    
    
    $
    358Earnings per common share:Basic net income per share
    
    $
    0.06
    
    
    $
    0.04Diluted net income per share
    
    
    0.06
    
    
    
    0.04Weighted-average basic shares outstanding
    
    
    9,397,000
    
    
    
    9,365,000Weighted-average diluted shares outstanding
    
    
    9,412,000
    
    
    
    9,382,000
  5




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BREEZE-EASTERN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three Months EndedJune 30, 2010
    
    
    June 28, 2009Cash flows from operating activities:Net income
    
    $
    589
    
    
    $
    358Adjustments to reconcile net income to net cash provided by operating activities:Loss on disposal of property and equipment
    
    
    4
    
    
    
    Depreciation and amortization
    
    
    470
    
    
    
    359Non-cash interest expense
    
    
    108
    
    
    
    15Stock based compensation
    
    
    119
    
    
    
    176Provision for losses on accounts receivable
    
    
    4
    
    
    
    1Deferred taxes-net
    
    
    343
    
    
    
    222Changes in assets and liabilities:(Increase) decrease in accounts receivable and other receivables
    
    
    (2,782
    )
    
    
    5,050Decrease (increase) in inventories
    
    
    465
    
    
    
    (4,691
    )Decrease (increase) in other assets
    
    
    281
    
    
    
    (302
    )Increase in accounts payable
    
    
    582
    
    
    
    19(Decrease) increase in accrued compensation
    
    
    (19
    )
    
    
    79Increase (decrease) in accrued income taxes
    
    
    41
    
    
    
    (50
    )(Decrease) increase in other liabilities
    
    
    (158
    )
    
    
    79Net cash provided by operating activities
    
    
    47
    
    
    
    1,315Cash flows from investing activities:Capital expenditures
    
    
    (174
    )
    
    
    (843
    )Capitalized project costs
    
    
    (61
    )
    
    
    (114
    )Net cash used in investing activities
    
    
    (235
    )
    
    
    (957
    )Cash flows from financing activities:Payments on long-term debt
    
    
    (822
    )
    
    
    (821
    )Net borrowings (repayments) of other debt
    
    
    
    
    
    
    Net cash used in financing activities
    
    
    (822
    )
    
    
    (821
    )Decrease in cash
    
    
    (1,010
    )
    
    
    (463
    )Cash at beginning of period
    
    
    3,371
    
    
    
    2,667Cash at end of period
    
    $
    2,361
    
    
    $
    2,204Supplemental information:Interest payments
    
    $
    162
    
    
    $
    198Income tax payments
    
    $
    42
    
    
    $
    87
  6




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NOTE 1. Financial Presentation
  NOTE 2. Earnings Per Share
   June 30,
    
    
    June 28,2010
    
    
    2009Basic Earnings per Common Share:Weighted-average common shares outstanding for
basic earnings per share calculation
    
    
    9,397,000
    
    
    
    9,365,000Diluted Earnings per Common Share:Weighted-average common shares outstanding
    
    
    9,397,000
    
    
    
    9,365,000Stock options (a)
    
    
    15,000
    
    
    
    17,000Weighted-average common shares outstanding for
diluted earnings per share calculation
    
    
    9,412,000
    
    
    
    9,382,000
 
 (a)
    
    During the three month periods ended June 30, 2010 and June 28, 2009, options to purchase
367,000 and 382,000 shares of common stock, respectively, were not included in the computation
of diluted earnings per share because the exercise prices of these options were greater than
the average market price of the common share. NOTE 3. Stock-Based Compensation
     7




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2011 $2.41 value
    
    
    2010 $2.52 value
    
    
    2010 $2.55 value
    
    
    2010 $2.63 valueper option
    
    
    per option
    
    
    per option
    
    
    per optionDividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    30.19
    %
    
    
    32.6
    %
    
    
    34.0
    %
    
    
    34.0
    %Risk-free interest rate
    
    
    3.2
    %
    
    
    3.1
    %
    
    
    3.2
    %
    
    
    3.4
    %Expected term of options (in years)
    
    
    7.0
    
    
    
    7.0
    
    
    
    7.0
    
    
    
    7.0
  Aggregate
    
    
    Approximate
    
    
    Weighted-Intrinsic
    
    
    Remaining
    
    
    AverageNumber
    
    
    Value
    
    
    Contractual
    
    
    Exerciseof Shares
    
    
    (in thousands)
    
    
    Term (Years)
    
    
    PriceOutstanding at March 31, 2010
    
    
    624,911
    
    
    $
    198
    
    
    
    7
    
    
    $
    8.38Granted
    
    
    26,000
    
    
    
    
    
    
    
    
    
    
    
    6.20Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled or expired
    
    
    (48,000
    )
    
    
    
    
    
    
    
    
    
    
    8.65Outstanding at June 30, 2010
    
    
    602,911
    
    
    
    10
    
    
    
    7
    
    
    
    8.27Options exercisable at June 30, 2010
    
    
    397,577
    
    
    
    10
    
    
    
    5
    
    
    
    9.08Unvested options expected to become
exercisable after June 30, 2010
    
    
    205,334
    
    
    
    
    
    
    
    9
    
    
    
    6.70Shares available for future option grants at June 30, 2010 (a)
    
    
    185,214
 
 (a)
    
    May be decreased by restricted stock grants.  8




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Weighted AverageGrant DateNumber of Shares
    
    
    Fair ValueNon-vested at March 31, 2010
    
    
    37,984
    
    
    $
    6.43Granted
    
    
    
    
    
    
    Vested
    
    
    (1,899
    )
    
    
    11.61Cancelled
    
    
    ( 239
    )
    
    
    11.07Non-vested at June 30, 2010
    
    
    35,846
    
    
    
    6.12
    NOTE 4. Inventories
  June 30,
    
    
    March 31,2010
    
    
    2010Finished goods
    
    $
    1,094
    
    
    $
    1,985Work in process
    
    
    5,266
    
    
    
    6,133Purchased and manufactured parts
    
    
    13,128
    
    
    
    11,78519,488
    
    
    
    19,903Reserve for slow moving and obsolescence
    
    
    (2,588
    )
    
    
    (2,538
    )Total
    
    $
    16,900
    
    
    $
    17,365
 9




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NOTE 5. Property, Equipment, and Related Depreciation
   Machinery and equipment
    
    
    3 to 10 yearsFurniture and fixtures
    
    
    3 to 10 yearsComputer hardware and software
    
    
    3 to 5 yearsLeasehold improvements
    
    10 years
  NOTE 6. Product Warranty Costs
  Balance at March 31, 2010
    
    $
    179Warranty costs incurred
    
    
    ( 41
    )Change in estimates to pre-existing warranties
    
    
    ( 1
    )Product warranty accrual
    
    
    70Balance at June 30, 2010
    
    $
    207
 NOTE 7. Income Taxes
    10




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NOTE 8. Long-Term Debt Payable to Banks
  $ Thousands
    
    June 30, 2010
    
    
    March 31, 2010Senior Credit Facility
    
    $
    17,250
    
    
    $
    18,072Less current maturities
    
    
    3,286
    
    
    
    3,286Total long-term debt
    
    $
    13,964
    
    
    $
    14,786
 Senior Credit Facility -
   11




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Interest Rate Swap
 NOTE 9. Fair Value Measurements
  
    
    Level 1- Unadjusted quoted prices for identical assets or liabilities in active markets;
    
    Level 2-Inputs other than quoted prices in active markets for identical assets or
liabilities that are observable whether directly or indirectly for substantially the full
term of the asset or liability; and
    
    Level 3-Unobservable inputs for the asset or liability, which include managements own
assumptions about what the assumptions market participants would use in pricing the asset
or liability, including assumptions about risk.
   Carrying Amount
    
    
    Fair ValueLong-term debt
    
    $
    17,250
    
    
    $
    17,250Interest rate swap liability included in
other long- term liabilities (Level 2)
    
    
    164
    
    
    
    164
 NOTE 10. Employee Benefit Plans
    12




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Postretirement Benefits
    
    
    Pension PlanThree Months Ended
    
    
    Three Months EndedJune 30, 2010
    
    
    June 28, 2009
    
    
    June 30, 2010
    
    
    June 28, 2009Interest cost
    
    $
    11
    
    
    $
    9
    
    
    $
    44
    
    
    $
    Amortization of net (gain) loss
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Net periodic cost
    
    $
    17
    
    
    $
    9
    
    
    $
    44
    
    
    $
    
 NOTE 11. Concentration of Credit Risk
  NOTE 12. New Accounting Standards
    13




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NOTE 13. Contingencies
 Environmental Matters
     14




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15




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Litigation
  NOTE 14. Segment, Geographic Location and Customer Information
    Location
    
    June 30, 2010
    
    
    June 28, 2009United States
    
    $
    10,276
    
    
    $
    6,295Other non-United States
    
    
    1,924
    
    
    
    1,747Italy
    
    
    1,557
    
    
    
    2,220Pacific and Far East
    
    
    1,534
    
    
    
    1,592Other European countries
    
    
    889
    
    
    
    1,229England
    
    
    360
    
    
    
    279Total
    
    $
    16,540
    
    
    $
    13,362
 16




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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
     OVERVIEW
  17




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CORE BUSINESS
  PRODUCTS AND SERVICES
  Products
      Services
   18




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OUTLOOK
  CRITICAL ACCOUNTING POLICIES
  Results of Operations
 Three Months Ended June 30, 2010 Compared with Three Months Ended June 28, 2009
 Three Months Ended
    
    Increase/(Decrease)June 30,
    
    June 28,2010
    
    2009
    
    $
    
    %Products
    
    $
    13,085
    
    
    $
    8,188
    
    
    $
    4,897
    
    
    
    59.8
    %Services
    
    
    3,455
    
    
    
    5,174
    
    
    
    (1,719
    )
    
    
    (33.2
    )Net sales
    
    
    16,540
    
    
    
    13,362
    
    
    
    3,178
    
    
    
    23.8Products
    
    
    7,200
    
    
    
    4,552
    
    
    
    2,648
    
    
    
    58.2Services
    
    
    3,207
    
    
    
    3,576
    
    
    
    (369
    )
    
    
    (10.3
    )Cost of sales
    
    
    10,407
    
    
    
    8,128
    
    
    
    2,279
    
    
    
    28.0Gross profit
    
    
    6,133
    
    
    
    5,234
    
    
    
    899
    
    
    
    17.2Selling, general, and administrative expenses
    
    
    4,629
    
    
    
    4,184
    
    
    
    445
    
    
    
    10.6Relocation expense
    
    
    211
    
    
    
    138
    
    
    
    73
    
    
    
    52.9Operating income
    
    
    1,293
    
    
    
    912
    
    
    
    381
    
    
    
    41.8Interest expense
    
    
    214
    
    
    
    234
    
    
    
    (20
    )
    
    
    (8.6
    )Net income
    
    $
    589
    
    
    $
    358
    
    
    $
    231
    
    
    
    64.5
    %
 Net Sales.
 19




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Cost of Sales.
  Gross profit.
 Selling, General, and Administrative Expenses.
  Interest Expense
 Net Income
 New Orders
  20




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Backlog .
    Liquidity and Capital Resources
   Working Capital
   21




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Capital Expenditures
  Senior Credit Facility
  Interest Rate Swap
  TAX BENEFITS FROM NET OPERATING LOSSES
  CONTRACTUAL OBLIGATIONS
  Payments Due By PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    More ThanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsDebt principal repayments (a)
    
    $
    17,250
    
    
    $
    3,286
    
    
    $
    6,571
    
    
    $
    7,393
    
    
    $
    Estimated interest payments on long-term debt (b)
    
    
    1,498
    
    
    
    618
    
    
    
    837
    
    
    
    43
    
    
    
    Operating leases (c)
    
    
    9,251
    
    
    
    1,017
    
    
    
    2,035
    
    
    
    2,040
    
    
    
    4,159Purchase Obligations (d)
    
    
    100
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    28,099
    
    
    $
    5,021
    
    
    $
    9,443
    
    
    $
    9,476
    
    
    $
    4,159
 
 (a)
    
    Obligations for long-term debt reflect the requirements of the term loan under the
Senior Credit Facility. See Note 8 of Notes to Condensed Consolidated Financial Statements
contained elsewhere in this report.(b)
    
    Estimated interest payments on long-term debt reflect the scheduled interest payments of the
term loan under the Senior Credit Facility and assume an effective weighted average interest rate
of 4.1%, our blended interest rate at June 30, 2010.(c)
    
    Obligations for capital equipment and build-out of our facility in Whippany, New Jersey. 22




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(d)
    
    Our supplier purchase orders contain provisions allowing vendors to recover certain costs in
the event of cancellation for convenience by us. We believe that we do not have ongoing purchase
obligations with respect to our suppliers that are material in amount or that would result,
individually or collectively, in a material loss exposure to us if cancelled for convenience.
Furthermore, purchase obligations for capital assets and services historically have not been
material in amount. INFLATION
  CONTINGENCIES
 Environmental matters 
 Litigation 
 RECENTLY ISSUED ACCOUNTING STANDARDS
  23




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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     24




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Item 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
  
 Item 1A. RISK FACTORS
  
 Item 6. EXHIBITS
 31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 25




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SIGNATURES
  BREEZE-EASTERN CORPORATION
                 (Registrant)Dated:  August 10, 2010
    By:
    /s/  Mark D. MishlerMark D. Mishler, Senior Vice President,Chief Financial Officer, Treasurer, and Secretary * 
 *
    
    On behalf of the Registrant and as Principal Financial and Accounting Officer. 26